According to the Reserve Bank of Australia (RBA), inflation is forecast to reach 6% in the latter part of 2022.This increase is echoed across the globe as economies deal with supply chain interruptions and increasing commodity prices. We chatted to local, Orange-based financial firm, Step Up Financial Group for some tips to help cope with rising inflation and the cost of living.
Tip #1: Budget
The impact of increased inflation will undoubtedly affect almost every touch point in your day-to-day living. Fuel prices have reached record highs, which are attributed to the unrest in Ukraine, and the UN global price index is up 27% over the last year. The World Bank is anticipating growing food and commodity prices for the next three years due to unrest in Eastern Europe. Unfortunately, these increases have a direct effect on daily living expenses, so updating your monthly budget and sticking to it is critical.
Divide your budget into housing, transport, food, utilities, insurance, healthcare or medical, school fees, entertainment, home maintenance, clothing, memberships, beauty, savings, investment or debt repayments and miscellaneous expenses (home appliances, decor etc).
Tip #2: Get serious about your spending
Once you’ve gone through your budget and you know what your monthly expenses are, you may need to consider reducing some of your expenses or removing
them altogether. YouTube is flooded with home workouts that you may want to consider instead of a monthly gym membership. Daily coffee runs may need
to become weekly coffee treats and canteen lunches are just as good (sometimes even better) coming from your own kitchen.
Tip #3: Finding alternatives
Habits are reflected in day-to-day spending. If you are used to buying a specific brand of product and have never stopped to check the price difference of a cheaper alternative, now may be the time to start doing so.
On your next visit to the store, take the time to look at the washing powder options, as an example. The price difference for a box of powder differs considerably from brand to brand, yet reviewers often find the cheaper options deliver better results.
Tip #4: Don’t neglect your debt
Easier said than done when under financial pressure. In modern-day society, borrowing money has never been easier. But credit cards, rent-to-buy, no-deposit, after-pay and the like are all schemes that offer instant financial gratification with hidden fees and high-interest consequences.
Avoid entering into debt relationships that may require debt management strategies to get out of later. Investopedia suggests 20% of your monthly salary after tax should be allocated to savings AND debt repayments, so don’t over-commit. Paying close attention to your budget should assist you in identifying what you have available to spend. If you have already over-committed and find yourself in an overwhelming debt repayment situation you’ll need to consult with an expert.
Tip #5: Turn off the taps
We love technology. It has shifted the way we do everything and continues to evolve at expeditious rates. It makes life easier and seamless.
For budgeting purposes however, it may put you at a financial disadvantage. Being able to simply tap your card or phone for instant purchases may leave you in the dark with your daily spending, so try to give yourself pocket money in cash and use that instead. That way, you are in constant and conscious control of where your money is going. It may even boost your bank balance.
Tip #6: Switch off the spam
As tempting as those email specials and never-to- be-seen-again price drops are, acting on them will quickly spiral your financial situation into the drains of debt.
Unsubscribe to email blasts and remove shopping apps from your device. Plan your purchases and be deliberate about what you’re buying.
Tip #7: Find ways to save
A while back, the $5 challenge was doing the rounds on social media. Maybe now is the time to reintroduce this into your home? The idea is to save every $5 you get and put it in a jar and don’t touch it for a year. Those $5 really do stack up and this is an easy and great way to get creative with your saving.